Booming growth in Britain (Brexit?) but child poverty rises (austerity)

It’s Day 14 today and later this afternoon I am to be released from my stint in quarantine as a result of shifting myself from Newcastle to Melbourne 2 weeks ago. NSW (where Newcastle is located) is now an area of extreme risk according to the Victorian government, given the growing COVID outbreak in Sydney, and any resident travelling back into Victoria was required to do the 14 days in strict Iso. So today is my ‘freedom day’ after being stuck inside my residence for 2 weeks. Woo! Given my extensive CPI report yesterday, I am not treating today as my normal Wednesday work pattern and so apart from some great music, I offer a few observations on things that have come to mind recently.

Booming growth in Britain (Brexit?) but child poverty rises (austerity)

I am investigating this issue more and will report more fully on another day.

On July 28, 2021, the North East Region of the British ADCS (The Association of Directors
of Children’s Services Ltd) released the – North East region submission to the Independent Review of Children’s Social Care.

As background – The Independent Review of Children’s Social Care – was established on January 15, 2021 by the British Government as part of its “levelling up across the country” process.

I am collecting evidence to assess how that process is tracking.

The Review recognised that:

Government is committed to levelling up across the country. In order to do this, it is absolutely vital that we start with children and families – particularly the most vulnerable – to reduce the downstream impacts and costs to both the children themselves and society. Every child, no matter their background or the circumstances in which they grow up, must have the opportunity to fulfil their potential. Children’s social care is at the heart of this endeavour, with a unique ability to protect children and young people from risks or harms both inside and outside the home, and to help them realise their talents and aspirations for the future.

So, noble ambitions.

And correct aims.

The NE Region Submission documents how things are standing in the North East of England and they found that:

1. “The numbers of children needing intensive support, including those in care, are not sustainable in the North East or nationally. More importantly, the current arrangements do not serve families well and do not lead to the best outcomes for children. There is a clear imperative for change.”

2. “Levels of poverty in the North East are driving continuing rises in child protection intervention and the number of children in care.”

3. “Even before the Covid pandemic, after a decade of austerity, the picture in the region was deteriorating markedly, with the steepest increase in relative child poverty (after housing costs) between 2014/15 and 2019/20 – rising from 26% to 37%. This is compared with a UK-wide increase from 29% to 31% and means that the North East has gone from having a child poverty rate just below the UK average to the second highest of any region or nation in just five years. ”

4. “The North East has the highest rate of referrals to children’s social care of any region, significantly higher than the national average.”

5. “Since 2009, the region has seen a 77% increase in its care population. Inner London has seen a 25% reduction over the same period.”

The North East Director concluded that:

Poverty is stark, shameful and obvious. Life chances are blighted. I’ve worked in a number of local authorities all over the country, but I’ve never worked anywhere where poverty is as bad and life chances so poor.

How has this happened?

1. Profit-making in the children’s residential care market has created a “dysfunctional market”.

2. Relentless fiscal austerity has created “vicious cycle with levels of demand causing pressures across the system and spiralling costs … there is a squeeze on spending compromising the ability to provide the prevention and early help needed to manage risk outside the statutory system and reduce children coming into care.”

So a lot of work to be done with substantial fiscal support on an on-going basis needed.

Now, juxtapose that with the latest news from the Confederation of British Industry (CBI) (July 22, 2021) – Record output growth for manufacturers, but cost pressures & supply concerns loom large.

We learn that the CBI’s survey of 250 British manufacturing businesses has:

1. “reported output increasing in 16 out of 17 sub-sectors, led by the motor vehicles & transport equipment and food, drink & tobacco sub-sectors.”

2. “Manufacturers expect output to grow at an even quicker pace in the next three months – the strongest growth expectations on record.”

3. “total new orders grew at their quickest pace since 1974. This reflected domestic orders expanding at their fastest rate on record (since 1975), and the first rise in export orders since January 2019.”

4. “numbers employed in the sector grew at their fastest pace since 1973, and are expected to increase at a slightly faster rate in the next three months.”

5. “Business optimism growth remained strong by historical standards, despite slowing from last quarter. The outlook further ahead is also more positive, with investment intentions for plant & machinery and training & retraining improving to their strongest since 1988 and 2015, respectively.”

Think about the implications of that.

First, and I will follow up on this point later, it is another nail in the Brexit is a disaster argument.

And William Keegan is still out there pumping out the fiction and in his latest article (July 25, 2021) – Labour must say it out loud: Brexit needs to be reversed – exhorting the British Labour Party to push for a return to the EU.

Second, more importantly, this sort of economic prosperity is clearly not being shared across the regions.

Levelling up not only requires that support services are well funded but also that well-paid jobs are available to ensure there is meaning to the term ‘school-to-work transition’.

More later on all of that.

The ABC ‘The Economists’ Program

I mentioned this a few weeks ago but at that stage I didn’t have a link to the actual show.

On July 15, 2021, I was a guest on the ABC Radio National Program – The Economists – talking about – Unemployment: How low can we go?

We talked about whether the unemployment rate could be driven down to below 2 per cent, as it was in teh true full employment era and what role a Job Guarantee could play.

Australian Labor Party abandons its progressive approach to tax policy

I will write about the decision this week by the Australian Labor Party to abandon its commitment to tax progression another day.

In the last few days, the ALP has indicated it will abandon three major economic policies that it took to the last election (that they lost).

1. They will now no longer restrict negative gearing – they had planned to restrict it to investments on new construction only.

Negative gearing allows high income earners and the wealthy to purchase houses and apartments, trick the revenue and cost structure to make losses and then write those losses off against other income, while enjoying the capital growth in the asset.

It has inflated housing prices and increased wealth inequalities.

Negative gearing is held out as a boost to the rental market (Keating’s lie) but with adequate provision of social housing those arguments lapse.

The evidence is that negative gearing has not kept rents lower than otherwise but has allowed high income Australians to gain massively at the expense of lower income workers.

It also diverts savings into non-productive investments and speculation away from investments in productive capacity, which boost productivity, increase international competitiveness and provide the inflation-free room for strong growth in real wages.

2. They will now no longer reduce the capital gains tax discount on all new acquisitions.

This will just reinforce the motivation for those with surplus funds to push them into housing (driving up prices) and away from productive investments.

3. But worse of all, it has abandoned its stance on the current conservative governments ‘stage 3’ income tax cuts which will significantly reduce the progression in the income tax structure – delivering massive gains to the highest income earners.

We now have a so-called progressive political party that is indistinguishable from the conservatives in this regard.

This is a party that was formed to be the political voice of the workers who are delivering massive gains to the highest income earners at the expense of the lowest.


And, unelectable.

There is no special reason any more for anyone with progressive aspirations to think that the ALP will give them any satisfaction.

But I do want to make another significant point here not related to the ALP’s disgraceful policy backflip.

Social media is, of course, awash with Modern Monetary Theory (MMT) and a host of different characters have made it a goal to become MMT proponents, which is a good thing in some respects.

But we have to ensure we don’t get ahead of ourselves and read more into things that is reasonable.

MMT is an economic framework for understanding how the macroeconomy works and the role of the currency-issuer in the monetary economy.

It has a rich history and provides a novel way of generating that understanding.

Its predictive capacity is excellent over 25 or more years. Many economists and observers keep saying they knew all this stuff but if you go back through the historical record, they were not rehearsing these ideas or conclusions until recently.

But MMT is not a ‘movement’, nor, is it a progressive agenda.

I keep reading things like “MMT advocates taxing the rich”.

It doesn’t.

What an understanding of MMT will allow one to conclude is that there is no contingency between the provision of public services or infrastructure by government and tax revenue it might receive from high income or wealth individuals.

MMT also provides a coherent aggregate explanation about the role of taxation in fiscal policy, which excludes any causal association between the government receiving tax revenue and spending.

That is it.

MMT is agnostic about where the tax revenue comes from.

The body of knowledge does not cover questions of incidence, progression or regression and all the other facets of taxation policy and structure that experts in that field are interested in.

When I talk about the need to ‘tax the rich’, I am expressing a value system, which is quite separate from when I am teaching the principles of MMT.

I want to tax the rich to ensure they have less financial resources so they can spend less on things like lobbying governments, influencing elections, dominating the media etc.

I want a progressive tax policy to ensure that income tax burdens are eased on low income workers to ensure they have greater purchasing power.

A litre of milk and a loaf of bread is more important than a BMW car.

So we have to avoid conflating our value systems with the MMT knowledge.

MMT is not a progressive doctrine although it empowers those who do associate with that sort of ideological position.

Would you invest in a Gym?

I was interested in this data – 1/3 gym members won’t return after vaccine (11K surveyed) – which was published on May 21, 2021.

I am not a gym junkie – I prefer to run outside each day – but I do lift some weights and use resistance bands to keep my ageing body working.

COVID has altered behaviour in many ways, some of them will be lasting.

It seems that the trend towards exercising in gyms is on the decline and one wonders whether that business model can be retrieved.

I read another article the other day that suggested people were running more outside again in response to lockdowns and the need to maintain fitness in isolation of others.

Music – Let’s go back to the 1960s

I am not near my records while in Melbourne so I have to listen to digital versions that I created so that the disks are mobile.

I was looking for an album to celebrate my release from 14-days quarantine, which is a joyous occasion I can tell you.

Its the late 1960s, we are young and thinking we are free, big Hammond B3 organs are filling dance clubs, guitars are wild, basses are big, and there is not a care in the world, except, the Vietnam War, American imperialism, the fight against trade unions, the impending Club of Rome report, police brutality against Anti-war protesters, the growing demands of capital to abandon full employment.

Apart from all those things, everything is fine.

And – Julie Driscoll – with – Brian Auger and the Trinity – were around, pumping out the big sound.

Here is an early 45 rpm single from the band and this song was one of their lesser known offerings but probably the one I liked the most.

It was the B-side to their big Bob Dylan/Rick Danko hit – This Wheel’s on Fire.

It was released in June 1968 in the US but I didn’t get it until late 1969 at the import shop in Melbourne on the album Open (Polydor).

It captures the times and the haircuts were about right too (male and female).

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

This Post Has 2 Comments

  1. Labor lost the 2019 federal election narrowly when the polls and the governing Coalition expected to lose. Among the factors affecting the result were Labor’s proposal to restrict negative gearing to new property and halve The capital gains tax discount, some reductions on franking credits and former Greens leader, Bob Brown’s climate caravan to Queensland, Clive Palmer’s scare campaign that Labor would levy a 40% tax on inheritances and the Coalition’s scare campaign that Labor would ban fossil fuelled vehicles, take way tradies utes, etc,

    My point is that Labor now has become spooked and has abandoned the above policies and adopted a “realpolitik” attitude. It’s cynical but in the quest to return to office I can see the logic.

    Of course if labor had spent its years in Opposition in developing a cogent explanation of federal fiscal capacity and other policies which do not perpetuate the neoliberal paradigm that we need to tax the rich heavily to fund its program they might be governing now.

    Labor seems to be wary of upsetting aspirational voters and they either do not understand MMT or that they will be ridiculed.

  2. @Barri

    Aspirational voters (middle/upper middle class) here are trapped between the world of their parent’s aspirations and their own. Many of them still expect to be able to build wealth the way their parent’s did but increasingly suspect it won’t be as easy and should be further along that path than they are now. Hence Labour being stuck in a no man’s land.

    Younger generations (at university now) have no such illusions. And I don’t think that’s a mentality that will change as they grow older, so maybe the Corbyn regime was simply too early to survive.


    And a further factor into why the regions get so little funding is the dependency of the UK economy on financial services. It means London has an outsized influence in these decisions. It’s the geographical expression of government policies helping those who are already well off.

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